Tenants’ Improvements And Betterments

What Does Tenants’ Improvements And Betterments Mean?

Tenants’ improvements and betterments refer to the changes that a tenant while renting a property, pays for in order to make substantial renovations and additions. When a tenant makes significant improvements or betterments, the property owner must clearly establish who is responsible for any damages to the property, or they may encounter insurance issues.

Insuranceopedia Explains Tenants’ Improvements And Betterments

When a tenant makes valuable improvements to a building, it increases the building’s overall value. The property owner should either raise the limits of the property insurance policy to reflect this added value or include a clause in the rental agreement specifying that the tenant is responsible for damages to the improvements and betterments.

If the owner fails to do so, they may encounter difficulties when they need to file an insurance claim. For instance, if a building is worth $1 million a tenant adds $250,000 worth of improvements, and a fire destroys the entire building, the insurance adjuster will assess the property value at $1.25 million. In this scenario, many property insurance companies would penalize the owner for being underinsured.